As NPAs soar, Sinha wants RBI to regularly conduct AQR

Even as Reserve Bank has been saying that its asset quality review (AQR) of banks was a one-off process to unearth doubtful debts, Union Minister Jayant Sinha today said the watchdog should conduct such exercises regularly.
"It is prudent for the regulator to continuously conduct those kinds of reviews and I am sure they will continue to do it," the Minister of State for Finance told reporters here on the sidelines of a Crisil event.
The minister said the Reserve Bank did a "detailed investigation of system-wide stressed assets" starting from last June and the government has been working very closely with the central bank on it.

"We are working very closely with them on this type of systemic analysis and this stress testing and we have known all along what are the stress assets level likely to be," Sinha said.
After the review of top 150 stressed companies last December, the RBI reportedly asked banks to classify these accounts as bad loans irrespective of whether they are being serviced or not. This list was later trimmed to 130 companies.
The RBI gave banks leeway to spread the impact of the recognition over two quarters till March 2016. According to estimates, banks were to take a hit of Rs 70,000 crore through excess provisioning as a result of the AQR, and the results posted by banks where many lenders have reported historically high losses only confirm the impact of AQR.

After the exercise, the RBI brass led by Governor Raghuram Rajan and his deputy SS Mundra who steered the initiative, have said this was an one-off review.

The review was carried out as part of the target to clean up the bank balance sheets by March 2017 and ensure that the books reflect the true nature of the business.
At the end of the March quarter, the gross non-performing assets of the 45 listed banks had risen to Rs 5.81 trillion or 13 per cent of the system.
Sinha said the total amount of stress, which include NPAs and restructured accounts, in the system continues to be around Rs 8 trillion, a figure he had first disclosed in the Parliament.